Plan to build $458 million streetcar from Portland to Lake Oswego raises questions

Brian Feulner / The OregonianStreetcar has expanded from Northwest Portland to the South Waterfront District in the past 10 years despite minimal help from federal coffers. But now, with officials looking to extend the line to Lake Oswego and hoping to land $275 million in federal funding toward the $458 million project, streetcar is meeting its fiercest resistance. Opposition has been loudest in Lake Oswego and unincorporated Dunthorpe. "This is not like any other neighborhood in the region," Portland Mayor Sam Adams said of Dunthorpe. "This is a powerful neighborhood."

Ten years after Portland celebrated the return of streetcars, leaders are ready to promote the biggest, most expensive project yet -- a $458 million extension from South Waterfront to Lake Oswego.

Supporters say the line would spur redevelopment in Portland's Johns Landing neighborhood and Lake Oswego's Foothills District, where developer Homer Williams plans a small version of Pearl District-style housing and retail. The streetcar also would enhance Portland's national reputation for trendsetting transit.

Yet the project is unlike any in the United States, in both price and ambition, to link a big city and suburb by streetcar. As Portland and Lake Oswego leaders prepare to endorse the project, it remains steeped in unanswered questions: Does privileged Lake Oswego need a streetcar line to Portland? Should a publicly funded transit project be so closely tied to benefiting developers? Does the funding -- which includes the notion that an old trolley right of way purchased for about $2 million will be worth $97 million -- pencil out? Would the project's benefits be worth the price tag?

Residents of Dunthorpe, the wealthy enclave that lines much of the route, are protesting. Former U.S. Sen. Bob Packwood and investor Eli Morgan are among those paying lobbyist Len Bergstein to fight it.

"I'm concerned that the money isn't there to build it and that the money isn't there to operate it," said Multnomah County Commissioner Deborah Kafoury, whose district includes Southwest Portland and unincorporated Dunthorpe. "And I'm also concerned about the message that it sends to the community. We're telling people we're going to continue to move down this track and we'll find money when I think there are other more pressing issues in our community."

"A great day"

In July 2001, Portland held a parade as five streetcars began rumbling down city roads. A Brazilian-style band led the way as leaders tossed colorful beads.

"This is a great day for Portland," said then-city Commissioner Charlie Hales. "This means a lot, not only to us, but to our city's reputation."

He was right. Following the launch 15 years earlier of TriMet's MAX line, the streetcar solidified Portland's brand as a leader in smart planning. Hundreds of millions of dollars in redevelopment sprang up near streetcar routes.

By 2005, the line between Northwest 23rd Avenue and Portland State University had been extended to RiverPlace on the Willamette. Then the streetcar connected with another Portland icon, the tram. In 2007, it completed a loop through the South Waterfront District. Total construction costs for the entire four-mile system -- owned by the city of Portland and operated through nonprofit Portland Streetcar Inc. -- was $103 million.

On the regional stage, leaders in 2005 began looking at options for narrow Oregon 43 between Portland and Lake Oswego.

State engineers expect traffic to balloon by more than 40 percent in the next 20 years, to 35,700 cars a day near Lake Oswego. Even then, though, the highway won't come close to volumes on Oregon 99W, which already has daily traffic counts exceeding 40,000, earning it priority for a light-rail study.

Officials considered adding more buses. But, with a streetcar in mind, they zeroed in on leveraging the Willamette Shore Line right of way that local governments bought in 1988 for about $2 million.

Committee after committee is recommending the streetcar, saying it would create more construction jobs, offer better commuting times, limit carbon emissions and draw 1,500 more boardings a day than buses.

According to the latest estimates, the streetcar's annual operating expenses also would be about $1.25 million, half as much as an enhanced bus system. But because the streetcar would cost nine times more upfront, critics question whether it would ever prove more cost-effective.

Ridership is another issue. Projections show a few hundred people would stop driving on Oregon 43 during rush hour, with no impact on car travel time. Projections also show the streetcar line would draw as many as 11,930 boardings a day -- in 2035. That's fewer than ride the existing streetcar system right now.

Proponents, however, say that estimate doesn't take into account riders from the Foothills and other redevelopment.

That, city leaders say, is the main goal anyway.

"The streetcar is really a means to an end," said Brant Williams, Lake Oswego's director of economic and capital development. "The end is really what our downtown and Foothills area will look like."

New construction increases property values and adds housing and job capacity so the region doesn't have to expand its urban growth boundary onto farmland. But unlike the downtown streetcar, with stops along city blocks ripe for redevelopment, this project really offers only bookend opportunities in Lake Oswego and Portland's South Waterfront and Johns Landing areas.

"It's really around the opportunity that comes with streetcar to change the zoning so that we can build more complete neighborhoods, take care of growth that continues to come our way," Portland Mayor Sam Adams said. "So that is the opportunity."

Spiraling estimates

That opportunity has a cost.

Streetcar estimates have risen dramatically since officials began considering the project. Projections from 2007 suggested the line could be built for $157 million. That didn't include land costs, much of it along the trolley right of way owned by Portland, Lake Oswego and agencies such as TriMet and Metro. At the time, officials guessed the land could be worth as much as $50 million.

Three months ago, a report estimated the streetcar's cost at $347 million, a 68 percent jump. Factoring in inflation, the report puts the final cost in 2017, the target opening, at as much as $458 million.

"Literally, there appears to be no price too high to satisfy their obsession with new trains," said John Charles, who heads the Cascade Policy Institute, a Portland-area think tank that generally opposes rail projects.

The new report did include the land value -- and this is where things get especially squishy. It matters because federal money for rail projects is determined as a percentage of total costs. So the more the project costs, the more grant money it stands to receive.

The appraisal, before the real estate market fully tanked, was based on a common "across the fence" methodology that considered neighboring land. The result was then multiplied by an "enhancement factor" of 1.625 to capture the worth of the corridor for transit uses.

FTA spokesman Paul Griffo said the methodology has been used before but he declined to address the enhancement factor.

George Donnerberg, an appraiser for 40 years who didn't do the appraisal but is working for TriMet on another project, said the enhancement factor is "well within the range." But the range is so wide it could reduce or even triple value. "That's where the subjectivity comes in," he said.

Streetcar opponents hired their own appraiser to review the report.

"It is my view that the corridor value, which includes an enhancement factor, leads to an overly inflated value," wrote California appraiser Gary Valentine, without visiting the property.

Complicating matters, regional officials suggest the land will keep growing in value, reaching $97 million in 2017.

Banking on federal dollars

Another key factor is how much funding would come from the federal government. Of the projected $458 million total, local officials figure the land contribution at $97 million, money from other undetermined local sources at $86 million and federal grants at $275 million.

That puts the federal slice at 60 percent. And local officials expect the money to come from the New Starts program.

This holds uncertainty. TriMet counted on the feds to kick in 60 percent of the cost of a $1.5 billion MAX line to Milwaukie but learned at the 11th hour last year that it would get only 50 percent, leaving a $150 million gap. And New Starts regularly pays for light-rail lines but so far never a streetcar (unlike Small Starts).

Doug Obletz, whose firm Shiels Obletz Johnsen is managing the project, said 60 percent is reasonable for a project that costs less than $1 billion.

"We can be assured that if we go in and apply for 50 percent funding, we won't get more than that," he said.

Meanwhile, if the feds decide the land value is too high, officials would have to find other money.

Critics also question the project's close ties to redeveloping Lake Oswego's 107-acre Foothills District, at the end of the proposed line.

According to a predevelopment agreement with Lake Oswego, Portland company Williams/Dame & White -- Homer Williams' company -- can walk away if streetcar planning doesn't move forward. Williams' notable projects in the Pearl District and South Waterfront also feature streetcar access.

"Without the streetcar, the project becomes very unviable from a financial standpoint," said Matt Brown, a development manager for the company.

City officials and developers envision mostly housing and retail on 12 acres within the district, with buildings ranging from two to perhaps eight stories. The promise of redevelopment hasn't won over everyone. A group called Keep Lake Oswego Livable is fighting the streetcar project along with Dunthorpe residents.

"It is unconscionable to be spending public dollars on this project that makes no economic sense, that serves so few people, and is basically putting money into the pockets of Homer Williams and his firm, the Obletz firm, and making a name for a few public officials," said Dunthorpe resident Elizabeth English, whose property abuts the right of way.

If both councils approve, the next step will be signoffs by Clackamas and Multnomah counties, TriMet and Metro. Then comes more detailed planning and engineering. Pending more agreements, construction could begin as early as 2015.

Back in Portland, streetcar riders last week had mixed opinions.

Beatrice McCardle sold her car when she moved from California into a South Waterfront condo. She said she'd take the streetcar to Lake Oswego to visit friends.

Curt Johnson, who traded in a historic home in St. Louis for a South Waterfront condo, is more skeptical. Returning with a bag of groceries, he said the streetcar should provide access to communities that need it.

"Would you park your Bentley to ride a streetcar?" he asked. "I don't think I would."